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The Taxpayer Advocate

The 6th century BCE Chinese General Sun Tzu in his book The Art of War, reminds his followers: “It is said that if you know your enemies and know yourself, you will not be imperiled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperiled in every single battle.”

National Taxpayer Advocate Nina E. Olson delivered her report for 2012 on January 9, 2013. She identified the need for tax reform is the overriding priority in tax administration. She also expressed concern that the IRS is not adequately funded to serve taxpayers and collect tax, and identified ways in which this chronic underfunding harms taxpayers and the public purse.

If you’re like most people, you probably weren’t aware of the existence of the “Taxpayer Advocate Service” within the Internal Revenue Service. One of the principal duties of the National Taxpayer Advocate is to submit an annual report to Congress. This report includes:

A summary of the 20 most serious problems encountered by taxpayers;

Legislative and administrative recommendations for solving those problems; and

An examination of the year’s most frequently litigated issues.

The complexity of the tax code is identified as the #1 most serious problem facing taxpayers, making compliance difficult, requiring taxpayers to devote excessive time to preparing and filing their return, and obscuring comprehension, leaving many taxpayers and where how their taxes are competed and what rate of tax they pay. The Advocate believes the code facilitates tax avoidance by enabling sophisticated taxpayers to reduce their tax liabilities and provides criminals with opportunities to commit tax fraud. She points out to our national legislators that the complexity of the Code undermines trust in the system by creating an impression that many taxpayers are not compliant, thereby reducing the incentives that honest taxpayers feel to comply.

The report states that the tax code imposes a “significant, even unconscionable, burden on taxpayers.” Since 2001, Congress has made nearly 5,000 changes to the tax code, an average of more than one a day, and the number of words in the code appears to have reached nearly 4,000,000.

An analysis of IRS data by the Taxpayer Advocate Service shows that individuals and businesses spend about 6.1 billion hours a year complying with tax filing requirements.

There is much more in the full report, with all of which we might not agree.

Here at Potts and Company, while we definitely do not regard the Internal Revenue Service as an enemy, we must on occasion consider it to be an adversary, as we undertake to be our clients’ advocate. The National Taxpayer Advocate is drawing conclusions which have long been evident to us as tax practitioners and “on the ground” advocates. We know the IRS; and we know ourselves and our clients.